Outsourcing, Inc. to go private following fraud investigations

TOKYO, JAPAN – Japanese human resources company Outsourcing, Inc. announced its plan to go private by initiating a management buyout with American private investment firm Bain Capital Private Equity (Bain Capital). This comes after internal probes revealed fraudulent financial reporting by the Japanese firm.

If the tender offer pushes through, Outsourcing, Inc. will be delisted from the Tokyo Stock Exchange. According to the company’s calculations, the offer is valued at over ¥220 billion (US$1.53 billion). The firm’s board of directors has already voted for the buyout.

In November, two internal probes concluded that the company had exaggerated its revenues and expenses across multiple businesses from 2019 to 2022. The internal accounting fraud is estimated to have cost banks and businesses over US$150 million in losses.

American authorities have brought charges against former chiefs of Outsourcing Inc.’s U.S. payroll processing subsidiary related to check kiting (the crooked scheme of covering a bad check from one bank account to another) and tax evasion. The president of the American subsidiary has resigned, while several executives were slapped with disciplinary action and salary cuts.

In November, Outsourcing, Inc. announced a revenue of ¥551.7 billion (US$3.70 billion) for the first nine months, a year-over-year increase of 9.8%.

In a statement, Yuji Sugimoto and Naofumi Nishi, Partners of Bain Capital in Japan said: “We will make full use of our extensive management support systems and investment track record, both in Japan and globally, to enhance Outsourcing’s future growth and improve corporate value.” 

“As soon as the necessary procedures are completed, we will commence the tender offer, and we look forward to working together with the Outsourcing team as soon as possible.”